Consider the sheer volume of information flowing through today’s financial systems: every QR payment, e-KYC onboarding, credit card swipe, and cross-border transfer captures a data point. With digital banking and Open Banking, financial institutions are sitting on a goldmine of insights. But this isn’t just about data collection; it’s about converting that data into strategic advantage in a fast-moving, customer-driven landscape.
With digital banks gaining traction and regulators around the world pushing bold reforms, the industry is entering a new phase of financial innovation powered by data and accelerated by AI.
Ecosystm gathered insights and identified key challenges from senior banking leaders during a series of roundtables we moderated across Asia Pacific. The conversations revealed a clear picture of where momentum is building – and where obstacles continue to slow progress. From these discussions, several key themes emerged that highlight both opportunities and ongoing barriers in the Banking sector.
1. AI is Leading to End-to-End Transformation
Banks are moving beyond generic digital offerings to deliver hyper-personalised, data-driven experiences that build loyalty and drive engagement. AI is driving this shift by helping institutions anticipate customer needs through real-time analysis of behavioural, transactional, and demographic data. From pre-approved credit offers and contextual investment nudges to app interfaces that adapt to individual financial habits, personalisation is becoming a core strategy, not just a feature. This is a huge departure from reactive service models, positioning data as a long-term strategic asset.
But the impact of AI isn’t limited to customer-facing experiences. It’s also driving innovation deep within the banking stack, from fraud detection and SME loan processing to intelligent chatbots that scale customer support. On the infrastructure side, banks are investing in agile, AI-ready platforms to support automation, model training, and advanced analytics at scale. These shifts are redefining how banks operate, make decisions, and deliver value. Institutions that integrate AI across both front-end journeys and back-end processes are setting a new benchmark for agility, efficiency, and competitiveness in a fast-changing financial landscape.
2. Regulatory Shifts are Redrawing the Competitive Landscape
Regulators are moving quickly in Asia Pacific by introducing frameworks for Open Banking, real-time payments, and even AI-specific standards like Singapore’s AI Verify. But the challenge for banks isn’t just keeping up with evolving external mandates. Internally, many are navigating a complicated mix of overlapping policies, built up over years of compliance with local, regional, and global rules. This often slows down innovation and makes it harder to implement AI and automation consistently across the organisation.
As banks double down on AI, it is clear that governance can’t be an afterthought. Many are still dealing with fragmented ownership of AI systems, inconsistent oversight, and unclear rules around things like model fairness and explainability. The more progressive ones are starting to fix this by setting up centralised governance frameworks, investing in risk-based controls, and putting processes in place to monitor things like bias and model drift from day one. They are not just trying to stay compliant; they are preparing for what’s coming next. In this landscape, the ability to manage regulatory complexity with speed and clarity, both internally and externally, is quickly becoming a competitive edge.
3. Success Depends on Strategy, Not Just Tech
While enthusiasm for AI is high, sustainable success hinges on a clear, aligned strategy that connects technology to business outcomes. Many banks struggle with fragmented initiatives because they lack a unified roadmap that prioritises high-impact use cases. Without clear goals, AI projects often fail to deliver meaningful value, becoming isolated pilots with limited scalability.
To avoid this, banks need to develop robust return-on-investment (ROI) models tailored to their context — measuring benefits like faster credit decisioning, reduced fraud losses, or increased cross-selling effectiveness. These models must consider not only the upfront costs of infrastructure and talent, but also ongoing expenses such as model retraining, governance, and integration with existing systems.
Ethical AI governance is another essential pillar. With growing regulatory scrutiny and public concern about opaque “black box” models, banks must embed transparency, fairness, and accountability into their AI frameworks from the outset. This goes beyond compliance; strong governance builds trust and is key to responsible, long-term use of AI in sensitive, high-stakes financial environments.
4. Legacy Challenges Still Hold Banks Back
Despite strong momentum, many banks face foundational barriers that hinder effective AI deployment. Chief among these is data fragmentation. Core customer, transaction, compliance, and risk data are often scattered across legacy systems and third-party platforms, making it difficult to access the integrated, high-quality data that AI models require.
This limits the development of comprehensive solutions and makes AI implementations slower, costlier, and less effective. Instead of waiting for full system replacements, banks need to invest in integration layers and modern data platforms that unify data sources and make them AI-ready. These platforms can connect siloed systems – such as CRM, payments, and core banking – to deliver a consolidated view, which is crucial for accurate credit scoring, personalised offers, and effective risk management.
Banks must also address talent gaps. The shortage of in-house AI expertise means many institutions rely on external consultants, which increases costs and reduces knowledge transfer. Without building internal capabilities and adjusting existing processes to accommodate AI, even sophisticated models may end up underused or misapplied.
5. Collaboration and Capability Building are Key Enablers
AI transformation isn’t just a technology project – it’s an organisation-wide shift that requires new capabilities, ways of working, and strategic partnerships. Success depends on more than just hiring data scientists. Relationship managers, credit officers, compliance teams, and frontline staff all need to be trained to understand and act on AI-driven insights. Processes such as loan approvals, fraud escalations, and customer engagement must be redesigned to integrate AI outputs seamlessly.
To drive continuous innovation, banks should establish internal Centres of Excellence for AI. These hubs can lead experimentation with high-value use cases like predictive credit scoring or real-time fraud detection, while ensuring that learnings are shared across business units. They also help avoid duplication and promote strategic alignment.
Partnerships with fintechs, technology providers, and academic institutions play a vital role as well. These collaborations offer access to cutting-edge tools, niche expertise, and locally relevant AI models that reflect the regulatory, cultural, and linguistic contexts banks operate in. In a fast-moving and increasingly competitive space, this combination of internal capability building and external collaboration gives banks the agility and foresight to lead.
As they continue to promote innovation in the Financial Services industry, the Monetary Authority of Singapore (MAS) introduced the Financial Sector Technology and Innovation Scheme 3.0 (FSTI 3.0) earlier this week, pledging up to SGD 150 million over three years. FSTI 3.0 aims to boost innovation by supporting projects that use cutting-edge technologies or have a regional scope, while strengthening the technology ecosystem in the industry. This initiative includes three tracks:
- Enhanced Centre of Excellence track to expand grant funding to corporate venture capital entities
- Innovation Acceleration track to support emerging tech based FinTech solutions, and
- Environmental, Social, and Governance (ESG) FinTech track to accelerate ESG adoption in fintech
Additionally, FSTI 3.0 will continue to support areas like AI, data analytics, and RegTech while emphasising talent development. We can expect to see transformative financial innovation through greater industry collaboration.
MAS’ Continued Focus on Innovation
Over the years, the MAS has consistently been a driving force behind innovation in the Financial Services industry. They have actively promoted and supported technological advancements to enhance the industry’s competitiveness and resilience.
The FinTech Regulatory Sandbox framework offers a controlled space for financial institutions and FinTech innovators to test new financial products and services in a real-world setting, with tailored regulatory support. By temporarily relaxing specific regulatory requirements, the sandbox encourages experimentation, while ensuring safeguards to manage risks and uphold the financial system’s stability. Upon successful experimentation, entities must seamlessly transition to full compliance with relevant regulations.
Innovation Labs serve as incubators for new ideas, fostering a culture of experimentation and collaboration. They collaborate with disruptors, startups, and entrepreneurs to develop groundbreaking solutions. Labs like Accenture Innovation Hub, Allianz Asia Lab, Aviva Digital Garage, ANZ Innovation Lab, and AXA Digital Hive drive create prototypes, and roll out market solutions.
Building an Ecosystem
Partnerships between financial institutions, technology companies, startups, and academia contribute to Singapore’s economic growth and global competitiveness while ensuring adaptive regulation in an evolving landscape. By creating a vibrant ecosystem, MAS has facilitated knowledge exchange, collaborative projects, and the development of innovative solutions. For instance, in 2022, MAS partnered with United Nations Capital Development Fund (UNCDF) to build digital financial ecosystems for MSMEs in emerging economies.
This includes supporting projects that address environmental, social, and governance (ESG) concerns within the financial sector. For instance, MAS worked with the People’s Bank of China to establish the China-Singapore Green Finance Taskforce (GFTF) to enhance collaboration in green and transition finance. The aim is to focus on taxonomies, products, and technology to support the transition to a low-carbon future in the region, co-chaired by representatives from both countries.
MAS has also promoted Open Banking and API Frameworks to encourage financial institutions to adopt open banking practices enabling easier integration of financial services and encouraging innovation by third-party developers. This also empowers customers to have greater control over their financial data while fostering the development of new financial products and services by FinTech companies.
Regulators in Asia Pacific Taking a Proactive Approach
While Singapore is at the forefront of financial innovations, other regulatory and government bodies in Asia Pacific are also taking on an increasingly proactive role in nurturing innovation. This stance is being driven by a twofold objective – to accelerate economic growth through technological advancements and to ensure that innovative solutions align with regulatory requirements and safeguard consumer interests.
Recognising the potential of fintech to enhance financial services and drive economic growth, the Hong Kong Monetary Authority (HKMA) established the Fintech Facilitation Office (FFO) to facilitate communication between the fintech industry and traditional financial institutions. The central bank’s Smart Banking Initiatives, including the Faster Payment System, Open API Framework, and the Banking Made Easy initiative that reduces regulatory frictions help to enhance the efficiency and interoperability of digital payments.
The Financial Services Agency of Japan (FSA) has been actively working on creating a regulatory framework to facilitate fintech innovation, including revisions to existing laws to accommodate new technologies like blockchain. In 2020, FSA launched the Blockchain Governance Initiative Network (BGIN) to facilitate collaboration between the government, financial institutions, and the private sector to explore the potential of blockchain technology in enhancing financial services.
The Central Bank of the Philippines (Bangko Sentral ng Pilipinas – BSP) has launched an e-payments project to overcome challenges hindering electronic retail purchases, such as limited interbank transfer facilities, high bank fees, and low levels of trust among merchants and consumers. The initiative included the establishment of the National Retail Payment System, a framework for retail payment, and the introduction of automated clearing houses like PESONet and InstaPay. These efforts have increased the percentage of retail purchases made electronically from 1% to over 10% within five years, demonstrating the positive impact of effective cooperation and innovative policies in driving a shift towards a cash-lite economy.
The promotion of fintech innovation highlights a collective belief in its potential to transform finance and boost economies. As regulations adapt for technologies like blockchain and open banking, the Asia Pacific region is promoting collaboration between traditional financial institutions and emerging fintech players. This approach underscores a commitment to balance innovation with responsible oversight, ensuring that advanced financial solutions comply with regulatory standards.
We are in the midst of an economic and social crisis. COVID-19 will have far-reaching effects on organisations and how they do business. It is expected to drive more investments in Fintech, especially in digital payments, as more organisations and consumers adopt eCommerce. Countries will also have to re-think the ways they trade with other countries, as travel restrictions continue. This is expected to boost the Fintech industry and July was witness to how Fintech organisations, financial institutions and governments are gearing up to leverage Fintech in their path to economic and social recovery.
Financial Industry Seeing More Open Banking Initiatives
The banking industry is fast moving towards collaboration and openness. July saw several initiatives that take the industry closer to open banking.
Late last year, South Korea piloted an open banking system with participation from local banks and lenders. The Financial Services Commission (FSC), South Korea’s top financial regulator reported in July that the initiative had participation from 72 companies including commercial banks and Fintech firms with 20 million subscribers using the open banking services.
Australia introduced an open banking initiative, monitored by the Australian Competition and Consumer Commission (ACCC). From July, Australia’s banking customers can share their financial and banking data with accredited businesses under Consumer Data Right Act to access a better suite of financial applications.
There is global expansion as well. Railsbank, a global open banking platform with a presence in Southeast Asia introduced their services in the US market. The company will offer Banking-as-a Service, Cards-as-a Service and Credit Card-as-a-Service in the US market. Khaleeji Commercial Bank (KHCB), an Islamic bank in Bahrain, launched their open banking service enabling a customer to link their bank accounts with other banks and manage through the ‘Khaleeji 360’ platform. The portal allows clients to view all their bank accounts, automate operations and conduct banking through a unified platform.
Financial Institutions Increasing Partnerships with Fintech
Financial institutions no longer look at Fintech as competition. They appreciate that customers are at the centre of their entire operation – and Fintech services can and will provide them with the solutions they need. As financial institutions re-think their transformation journeys and face increasingly stringent regulations, they no longer have the option of ignoring Fintechs.
American Express, Visa, Mastercard and Discover came together to roll out a global standard. The big four’s advanced digital checkout solution Click to Pay is an online checkout system based on EMV Secure Remote Commerce (SRC) to make online payments across websites, mobile applications and connected devices, frictionless.
With an aim to unify payment solutions, a group of 16 major European banks launched the European Payment Initiative (EPI) to create a unified pan-European payment solution leveraging Instant Payments/SEPA Instant Credit Transfer (SCT Inst), including a card, e-wallet and P2P payments.
We also saw financial institutions strengthen their cross-border payment services in July. Deutsche Bank partnered with Airwallex to offer virtual account collections and API-enabled foreign exchange services in Japan and Hong Kong. The service will enable merchants and traders to transact through virtual accounts and APIs without opening bank accounts in foreign markets. Mastercard and Bank of China partnered to enhance cross-border business payments into China. This will enable global businesses to send payments to China while accessing real-time exchange rates, reduce the need for unnecessary documentation between merchants, and reduce transaction hassles and costs.
Fintechs Facilitating Cross-border Trade
Seamless cross-border financial transactions will be key to economic recovery, whether easy remittance or the ability to reach a larger market and be able to trade beyond borders.
July saw the formalisation of the Digital Economy Partnership Agreement (DEPA) between New Zealand, Chile and Singapore, to facilitate end-to-end digital trade, which includes establishing digital identities, paperless trade and the development of Fintech solutions to support it. The initiative also intends to allow cross-border data flow and give access to necessary government data to small and medium enterprises (SMEs) enabling them to be digital-ready to explore newer markets.
Dubai International Financial Centre (DIFC) signed an MoU with Jiaozi Fintech Dreamworks based in China opening new opportunities for innovation and trade. The agreement will enable Fintech companies based in both cities to access each other’s markets. Primarily established to facilitate the ‘Belt and Road’ initiative, it is a critical component of the DIFC’s 2024 strategy to strengthen relationships with the international financial community and increase access to the South-South corridor. Over the last few years, DIFC has been associated with over 200 Fintech organisations, and last month invested in four Fintech startups through their accelerator program. The agreement with Jiaozi will look at collaboration opportunities in Blockchain, AI and Cloud and will facilitate cross-border workshops and training programs.
Continuing Interests in Emerging Economies
Fintechs have been a means to bring about financial inclusion and are increasingly being used to target the unbanked and underbanked. Emerging economies continue to be attractive for Fintech organisations and global financial institutions.
With much of Malaysia’s economy dependent on foreign workers, Instapay, regulated by the Bank Negara Malaysia (BNM), announced a collaboration with Mastercard, to provide e-wallet accounts to the migrant workers. The widespread use of e-wallets by the migrant worker community will bring benefits to both workers, as well as their employers. Interestingly, Fintech providers in emerging economies are also looking to expand into other emerging markets. Malaysia’s GHL Group received approval from Philippines Securities and Exchange Commission to operate a lending business through their new unit, GHL Philippines Financing Services. GHL has been diversifying its business and has been operating its lending business in Malaysia and Thailand since 2019.
Crown Agent Bank, a wholesale foreign exchange and cross-border payment services based in the UK, partnered with South Africa’s biometric-based payment company, Paycode. Together the companies are aiming to reach 100 million unbanked customers where Crown Agents Bank will use their FX and payment services to bolster Paycode’s product offering and support financial inclusion across Sub-Saharan Africa.
India and Indonesia in the Asia Pacific continue to be popular markets because of the huge proportion of the unbanked population. Rapyd, a UK based global B2B Fintech-as-as-service provider partnered with major Indian e-payment providers – including Paytm, PhonePe, PayU, Citibank, DBS Bank, HDFC Bank, BharatPay, and Unimoni to launch an all-in-one payments solution that spans credit and debit cards, UPI, wallets, and cash. New registrations for digital banking in Indonesia are on the rise and Fintech startup Akulaku is capitalising on the potential digital banking overhaul to offer affordable and comprehensive financial services to consumers.
Fintechs benefiting other industries
The Fintech revolution has shown the path to several other industries – Healthcare and Agriculture are some of the industries that are hoping to benefit from Fintech organisations and their innovations. The MoU between Alibaba Cloud, Pfizer and Singapore’s Fintech Academy announced earlier in July, promises to give early and necessary guidance to Healthtech start-ups, and shows the deep connection between Healthtech and Fintech. In the Philippines, in an effort to improve financial services for farmers, AgriNurture acquired Fintech firm Pay8. By leveraging Pay8 e-wallet services, farmers will be able to access online payment services. This will enable the largely unbanked farmer community to become an active part of the economy.
The technology that these industries are looking to benefit from is Blockchain. South Korea brought Blockchain to their healthcare industry for better data management and storage. The 3 major telecommunications providers in the country – KT, SK Telecom and mobile carrier LG U+ – have also collaborated with KB Insurance to launch the blockchain-based mobile notification service (MNS) by matching customer data to their mobile subscription information. Oxfam Ireland – a charity organisation based in Ireland, received a sum of USD 1.18 million from the European Commission for a Blockchain-based pilot. The company is working on a project -The UnBlocked Cash – to help disaster-affected communities receive cash-based entitlements with more efficiency and traceability.
Fintech will continue to be a cornerstone of economic and social recovery in the future, and the financial industry will see more collaborations between Fintech organisations, financial institutions and governments. Other industries will continue to take learnings from Fintech.
